MANILA, Philippines - The Philippine economy expanded by 6.4 percent in the second quarter of the year, higher than the revised 5.6 percent in the first quarter but below the government's full-year target of 6.5-7.5 percent.

Buoyed by the industry and services sectors, the second quarter gross domestic product (GDP) growth was lower than the 7.9 percent registered a year ago.

Despite this, however, Director-General Arsenio Balisacan of the National Economic and Development Authority (NEDA) said the Philippines remains as a top performer in Asia.

"We remain as a bright spot in the region, the second fastest growing economy among major Asian countries for the period," he said.

Balisacan said the country's second quarter GDP growth tied with Malaysia's performance and was ahead of Indonesia's 5.1 percent and Thailand's 0.3 percent.

He said that on the demand side, net exports contributed 4.2 percentage points and household consumption contributed 3.6 percentage points in the GDP.

"This profile is in line with a more positive global economy, favorable business sentiment, and robust inflows of overseas Filipinos' remittances, he said.

On the supply side, however, most sectors posted strong growth except for the construction sector. The agriculture sector, meanwhile, made a major turnaround from the 0.2-percent contraction in the second quarter in 2013 to a 3.6-percent growth this year, he said.

Balisacan said the industry sector's 7.8-percent growth was tempered by the weak performance of the construction industry.

"Although private construction increased by 12.7 percent during the second quarter compared to last year, public construction reversed last year’s strong growth and recorded a significant reduction in the second quarter. Still, it is notable that the gross value added in manufacturing accelerated to 10.8 percent in this period, buoyed by strong external demand and household final consumption," he said.

Meanwhile, business activity in trade, real estate, renting and business activities, and transport, storage and communication pushed the services sector to 6 percent. Balisacan said the growth was in response to the increased demand for business process management and the expansion of economic activities.

On the demand side, the NEDA chief said the strong household spending reflected the still upbeat consumer sentiment in the country, but the slowdown in disbursements in personal services and maintenance and other operating expenditures (MOOE) led to the lack of growth in government consumption.

"According to the Department of Budget and Management, the slower spending was partly due to administrative bottlenecks. Some government agencies also needed to revise their work programs to increase service delivery in the Yolanda-affected areas. For instance, the Department of Health had to prioritize deployment of its personnel to render primary health care in the Yolanda-affected areas. The availability of donated supply reduced the need for MOOE even as the service was being delivered," he said.

Lower spending in infrastructure and other capital outlays also pulled down growth in public construction, he said. 

"Certainly, government underspending in this quarter is a cause for concern. But we assure you that the government is aware of this and is taking the right steps to address bottlenecks in the implementation of critical programs and projects, particularly key infrastructure projects," he said.

He said the government is confident that it can catch up on its work program for the year with disbursements in June jumping by almost 45 percent.

Balisacan said businesses maintain their positive outlook on the economy, but the government is aware that the private sector is still looking for more positive signals.

"We remain vigilant against factors that could temper our growth prospects," Balisacan said, adding that there is still a 'strong likelihood' that the economy will achieve its full-year target.

By: Jovan Cerda

Original Source: http://www.philstar.com/business/2014/08/28/1362687/philippine-economy-hits-6.4-q2

Read the statement of Secretary Balisacan on the 2014 Q2 performance of the Philippine economy at http://www.neda.gov.ph/?p=3805